Chicago IL Commercial Real Estate Market Trends Analysis

Industrial buildings are a class of commercial real estate that is utilized by businesses that provide services to other companies (B2B tenants). These tenants could in reality manufacture the goods, or they may be middlemen that deliver a manufacturer’s products to other companies.

However, today, there is an expanding group of industrial properties whose occupants are internet order fulfillment centers that deliver products directly to the purchaser.

Industrial property investors will hold the property long-term and function as the landlord. Their profitably calculations include rental revenue and asset value growth. Industrial lease agreements can be structured on either gross or net rent provisions.

Annual and 10 Year Population Growth

Industrial property investors require population data for reasons that are different from residential investors. They don’t lease to the general population, but they want to uncover a growing number of taxpayers in the community. If the local municipality cannot receive enough taxes, it isn’t able to maintain its obligations to properly repair the infrastructure that industrial tenants have to have.

All property values, commercial and residential, are impaired in places that are losing residents. The renters for industrial properties require a reliable local workforce. Big industrial tenants will shun areas that are dropping citizens.

Property Tax Rates

As we witnessed with multifamily investments, tax rates are an accurate clue to the economic strength of a potential market. Reliable tax rates are the sign of a foreseeable area for your investments.

Investors may need to learn more about industrial and commercial property taxation and commercial property tax reduction methods from our resources.

Accessibility

The tenants in industrial properties produce or transfer significant amounts of products that are bulky. They use large trucks to ship their goods. Industrial properties need to be near highways so that big vehicles can get to and from them without difficulty.

There are industrial businesses that use trains or airplanes to haul their products. This means that being close to an interstate, which typically goes near airports and train hubs, a large bonus for industrial properties.

Utilities

Manufacturing facilities often require significant amounts of power and water. If a property doesn’t contain adequate levels of these utilities, some tenants will look elsewhere.

Retail properties are leased by tenants that sell goods or services to consumers. This encompasses single-tenant and multi-tenant buildings. Sought after companies for single-tenant properties are pharmacies, auto parts stores, banks, and restaurants.

Multi-tenant buildings can be 2 or three space properties, modest “strip” shopping centers, significant “big box” or grocery centers with nationally known anchor stores. A big center with a collection of uses including office, retail, and residential are designated “lifestyle” shopping centers.

Retail leases are called “net” leases meaning the renters are responsible for the property taxes, insurance, and common area maintenance of the property in what is known as “additional rent”. Net lease agreements also state that the renter pays for the upkeep of the property.

Retail renters have specific location criteria that retail investors go by when considering demographic data.

Population Growth

The overall numbers and percentages for the whole region are only the beginning for retail property investors. The critical data will relate to the immediate trade area around the potential investment property. Retailers have to locate where their shoppers live, commute past, or work.

A trade area that does not already contain enough “rooftops” won’t satisfy retailers even if it is expanding. Retail real estate investors have to see the current population growth, average annual population growth, decade population growth, and daytime population.

Median Income

The population’s income standards are a significant component of retail location criteria. Expensive goods necessitate clients with high incomes while lower end products require lower income households.

Median Age

The age of the market’s populace can be critical to retail tenants leasing your property. If a retail property is placed near the age groups that potential tenants want, it is easier to draw them.

Property Tax Rates

Tax rate data is assessed by retail investors for the identical reasons as residential and industrial investors. Growing taxes are passed on to their tenants which lowers their occupancy rates, and the value of their property could be diminished down the road.

Having your commercial building incorrectly assessed by the county is an unobvious problem leading even to higher losses. If the value is erroneous, the best commercial real estate lawyers in Chicago IL know how to protest property taxes.

Office properties rent work locations to companies. Office buildings can be a one level flex space or a multi story building. Significant brands often would rather employ their assets for business growth instead of acquiring property.

Office lease agreements are most often gross or “full service” deals. The rent contains the landlord’s projected expenses for utilities, taxes, property insurance, and maintenance. The details can be changed according to the tenant and landlord’s requirements.

Office landlords are long term investors who anticipate returns from rental payments and the increased value of the asset.

Population

The specific demographic data that office property owners employ demonstrates the number of acceptable office employees in the population. This usually includes the total residents residing there, their levels of education, as well as median age. It’s vital for investors to understand what their prospective renters want and to assess the market appropriately.

Property Tax Rates

A properly managed city or county that draws potential office employees to the region won’t have high or constantly increasing tax rates. A qualified workforce pool draws desirable office tenants.

Incomes/Cost of Living

Higher incomes could show an educated population that a lot of office lessees need. The statistics also helps them budget for labor costs.

Education

Education levels are analyzed by office tenants and investors to a greater degree than other real estate investors. They have to know whether they are targeting lessees who need higher degrees of education or not.

When an investor obtains real estate, renovates it, leases it, refinances the property, and then repeats the procedure, it’s known as a BRRRR type of investment. These are long-term or Buy and Hold investments. This method has the benefit of providing short-term (rental) revenue and net income from the long-term increase in value.

After the property is bought and rehabbed, it is leased to a tenant. As soon as they can, the investor receives a “cash-out” refinance that enables them to pull funds out of the asset in cash. This becomes the cash investment on their subsequent investment, and they do it all again.

To buy and fix up a commercial property, investors prefer nontraditional financing. Banks and other traditional institutions don’t lend on this type of deals trying to avoid a high risk.

Our directory of commercial real estate vendors may shorten your way toward the best Chicago commercial hard money lenders and the best commercial rehab lenders in Chicago Illinois.

In this directory, you will also find the top commercial and industrial real estate brokers in Chicago IL
whose professional expertise will be valuable for your investment. Below is a set of indicators a broker can advise you about.

Median Gross Rents

Investors need to see desirable current rental rate levels and a history of acceptable rental rate bumps. This can impact decisions about where to invest and which assets to look for.

Property Value Growth

Real estate values are supposed to be increasing in the community for a buy and hold strategy to work.

Population

The crucial population data for buy and hold investors is the growth rate. Sluggish residential markets that they want to avoid will have flatlined or shrinking rates.

Income

Apartment complex investors should find out the income level of their potential renters. A property that doesn’t meet the needs of the community will have a high unoccupied rate.

Property Tax Rates

Growing taxes obviously cut into your profit. On the contrary, stable tax rates can point out a growing area.

Note that the Government’s assessments of property market worth are sometimes inaccurate, which makes investors pay excessive tax amounts unknowingly. The top Chicago commercial real estate valuation companies and the best commercial property tax consulting companies in Chicago IL are used by wise property owners to review the value.

People in the real estate business think of development as producing complete housing community projects or any sort of commercial property. A developer spots and acquires suitable property and creates either parcels for purchase or buildings that are rented to occupants.

Real estate development includes working with zoning permits, managing sitework plans created by civil engineers, working with engineers and architects on construction plans, and shepherding the venture through the local government for approval. When permits are communicated, the land is developed, and the finished product is marketed to the targeted audience.

The time required to complete a real estate development can be a year or more. Much can happen, before the project is finished, that can damage the developer’s returns. This uncertainty makes real estate development the most speculative sort of real estate business.

Different events can force developers to put a building process on hold. During this delay, the construction can be damaged by vandals, weather conditions, or other things. The best commercial real estate insurance firms in Chicago IL help local investors compensate for losses caused by such events.

Insurance must be included in your project costs for submitting it to a lender. You will be able to learn about the insurance companies that are considered trustworthy by talking to the best commercial construction lenders in Chicago Illinois directly.

Population

Developers utilize population size and growth pace in conjunction with economic and education information to make certain that there will be enough retail customers and residential homebuyers in the region.

Income

The income amounts of the market’s residents will determine the sort of retail development that the market will support. Premium retailers look for higher wage regions, but moderate priced retail stores require middle class shoppers.

Office and industrial tenants will need to see the pay rates that their potential workforce will expect. Those developers analyze wage statistics as one indication of a site’s possibilities for success.

Education

Businesses that lease space in industrial and office buildings have distinct education data in mind for their locations’ residents. White collar employers need to see a majority of college graduates. Mid level companies are okay with high school graduates.

Age

An aging citizenry that more often uses public accommodations isn’t what developers are after. These are the employees that office and industrial companies have to have. Residents who are still working normally go shopping and dine out repeatedly at retail establishments.

Residential neighborhoods developers prefer the same age group because they are probably moving up the social ladder, which stimulates home sales.

Investing in loan notes includes paying a lower amount than the payoff balance for a loan that’s in place so that the investor becomes the lender. Lenders are usually able to unload loans so they can boost their cash, however they frequently liquidate because the loan is “non-performing”.

A part of promissory note investors will renegotiate the loan to help the borrower make their loan payments — for a long-term investment. They know that if the borrower stops making payments, they can take back the collateral and unload it, which is a feature of the plan.

Population

Population size and how it changes are critical to these investors for the same reasons as the rest of investors. This data is a fast evaluation of the future economic viability of the market.

Property Values

A mortgage note investor wants to see that property values in the market are expanding. The strength of the asset is the strength of the investment.

Property Tax Rates

In an area with growing tax rates, the larger cost of having a property may push borrowers into foreclosure. This is not good for long-term investors, but advantageous for those who plan to turn their investment around quickly via a sale of the asset.

A REIT (Real Estate Investment Trust) is a business that holds and manages income generating real estate. Their revenue comes from lease payments and the periodic sale of properties.

REITs are required to distribute ninety percent of their net revenue in dividends which is attractive to a lot of investors. Modest investors appreciate REITs because they are able to unload their shares when they want.

People who invest in shares in a REIT have no vote in which units are purchased or how they are managed because they are passive investors.

Property owners pondering becoming passive investors look into buying REIT shares. When you liquidate investment property, you can use the proceeds to invest in REITs.

If that’s your plan, using a 721 exchange is the thriftiest strategy. Our resources — What Is a 721 Tax Deferred Exchange? and Pros and Cons of a 1031 Exchange into DST — will enable you to learn the benefits and rules of this transaction.

For this type of transaction, you will have to employ a 1031 exchange accommodator. Find them in our list of the best 1031 exchange companies in Chicago IL.

Another investment vehicle that raises capital from individuals to invest in real property is a real estate investment fund. These companies do not own real estate — they own interest in organizations that do, like REITs.

Unlike REITS, funds are not required to distribute dividends. The shareholder’s profit is produced by the value of the fund’s stock.

The most common investment funds include mutual funds, ETFs (exchange-traded funds), and private equity funds for wealthy individuals. Shares in investment funds are purchased and liquidated on the open market which is helpful for starting investors.

As they are passive investors, fund shareholders aren’t involved in any choices including asset purchases.